SBP asks dealers to narrow bank-kerb $-Re rates

KARACHI - Governor State Bank of Pakistan on Thursday asked the leading currency dealers to narrow down widening gap between the inter-bank and open market exchange rate of dollar vs rupee. She said this while chairing a meeting at SBP that aimed at discussing the reforms in currency markets and to curb speculative trade of the foreign currencies, especially the US dollar. While referring to recent speculative trends in the kerb market, Dr Shamshad Akhtar has directed the exchange companies to keep dollar-rupee parity differential between the Inter-Bank and Kerb markets at rational levels, restrain from speculation and to focus on bringing in home remittances into the country. "This differential should not be beyond normal trends seen in the past," she told exchange companies representatives. It is worth mention here that despite having meeting with exchange companies by SBP Governor, the rupee-dollar parity reached to Rs 68 in the open market dealings by keeping its volatile move on Thursday. Rupee shed grounds versus greenback in the interbank market on the same day and the American currency opened new day's trading its closing rate of Rs.66/80, continued to post gains and changed hands at Rs.67/00 at close of market. In kerb dealings the national currency remained under pressure versus dollar amid demand of the US currency continued to rise. The US dollar kicked off new day's trading at Rs.67/20, continued to post gains and was changing hands at Rs.68/00 at close of markets on Thursday. In response, the Exchange Companies representatives gave a firm commitment to the Governor that they will ensure that dollar-rupee parity differential between the Inter-Bank and Kerb market comes down to normal levels within a week. They also assured their cooperation to work with SBP. Dr Akhtar said that instead of curbing speculative trends, some exchange companies are playing a role in the speculation that is totally unacceptable. "You should not be led by speculation...it is the time to serve the country not to mint money through irregularities," she added. Dr Shamshad has announced the blueprint of reforms being introduced in the Exchange Company Sector with a view to (i) define more clearly the objectives and scope of exchange companies, (ii) well capitalize the sector, and (iii) bring better market discipline through enhanced transparency, disclosure and strong monitoring and supervision. However, these measures will be introduced in a manner that promotes long-term business interests in an effective and well-encompassing regulatory environment while seeking to avoid potentially adverse near-term impacts on the service levels of Exchange Companies for general public. This announcement was made by the Governor during a meeting with the Heads of Exchange Companies held at the State Bank of Pakistan, on Thursday. Dr Akhtar said that SBP has decided to change its approach from 'bringing financial discipline and corporate culture' to 'ensuring discipline and maximum compliance'. In this respect SBP has reviewed the whole regime for exchange companies with the objective of defining better role and responsibility of exchange companies. On the enforcement side, the exchange companies should not expect any leniency. SBP would not spare any company regardless of its market size to establish the regulatory writ. She announced that the State Bank is launching the second-phase reforms for the exchange companies and will issue regulatory guidelines that will set in motion corporate governance reforms for the exchange companies. A notice regarding these reforms was issued to exchange companies in the last meeting chaired by the Governor. "Our intention is to take you (exchange companies) forward and to promote your businesses provided you abide by rules of business," she asserted. She also urged upon the exchange companies to seek mergers & acquisitions so as to consolidate and strengthen the sector and increase its efficiency.